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Tag: Nobel

Dr. Paul Krugman, the hyper-productive New York Times columnist and Nobel laureate, has produced a flood of fiscal factoids. He argues that the only way to put the major economies around the world back on track is to “stimulate” them via deficit-financed government spending.

Most recently, Dr. Krugman has weighed in repeatedly on Greece’s travails with his fiscalist snake oil. His column of January 26th, “Ending Greece’s Nightmare,” makes it clear that he thinks he can deliver an elixir.

Prof. Krugman’s New York Times column, “Hot Money Blues” (25 March 2013) is a case in point. Prof. Krugman sprinkles holy water on the capital controls that will be imposed in Cyprus. He further praises to the sky the post-1980 capital controls that were introduced in a number of other countries.

But the truth, hard as it may be for ideologues to accept, is that unrestricted movement of capital is looking more and more like a failed experiment.

Fine. But, not once did Prof. Krugman mention that there just might be a significant cost associated with the imposition of capital controls – a cost with which Prof. Krugman is surely familiar.

Before more politicians fall under the spell of capital controls, they should take note of what another Nobelist, Friedrich Hayek, had to say in his 1944 classic, The Road to Serfdom:

The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges. Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference. Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape—not merely for the rich but for everybody.

When it comes to capital controls, I think the Cypriots – even the non-ideologues – might be inclined to agree with Hayek over Krugman.

The New York Times tries to spin the work of Nobel laureates Elinor Ostrom and Oliver Williamson as not anti-regulation:

Neither Ms. Ostrom nor Mr. Williamson has argued against regulation. Quite the contrary, their work found that people in business adopt for themselves numerous forms of regulation and rules of behavior — called “governance” in economic jargon — doing so independently of government or without being told to do so by corporate bosses.

But none of us “anti-regulation” folks are against “rules of behavior that people in business adopt for themselves independently of government.” The world is full of rules, from wearing clothes in the office to customary trade practices to the rules for managing common-pool resources that Ostrom studied. Anyone who opposed such “forms of regulation” wouldn’t be a libertarian or even an anarchist – he’d be a nihilist. (Of course, one could sensibly oppose particular rules; but no one seriously wants a world without rules of behavior.)

Some have summarized their work by saying that institutions other than free markets often work well. But that statement can mislead you to conclude that government solutions are the answer. Free markets are only a subset of free institutions. A better way to sum up their work is that what Ms. Ostrom and Mr. Willamson really show is that voluntary associations work.

The Concise Encyclopedia of Economics defines “regulation” this way: “Regulation consists of requirements the government imposes on private firms and individuals to achieve government’s purposes.” That’s the kind of regulation that is controversial among economists and often criticized by libertarians. It is entirely different from “rules of behavior that people in business adopt for themselves independently of government.” Those sorts of rules – often called “governance,” as the New York Times notes – are private and voluntary, made by the voluntary interactions of a few or many people.

The work of Ostrom and Williamson supports the idea of spontaneous order, an order that emerges as result of the voluntary activities of individuals and not through the commands of government. Spontaneous order can be hard to grasp, though it is the background of our entire world – language, common law, money, and the economy are all spontaneous orders (though government has intruded into some of those orders). It’s misleading to say that work of Ostrom and Williamson is somehow supportive of “regulation,” given the way that word is commonly used.

Hours after thanking the world for the Nobel Peace Prize this morning, President Obama will gather with his war advisers to ponder sending 60,000 more troops into a country where our national security objectives are unclear at best.

Instead of embracing General McChrystal’s proposal for a substantial increase in the U.S. military presence — or even adopting a “McChrystal-Light” strategy — the Obama administration should begin a phased withdrawal of troops over the next 18 months, retaining only a small military footprint relying on special forces personnel. Otherwise, America will be entangled for years — or decades — in pursuit of unattainable goals.

We need to “define success down” in Afghanistan. That means abandoning any notion of transforming ethnically fractured, pre-industrial Afghanistan into a modern, cohesive nation state. It also means reversing the drift in Washington’s strategy over the past eight years that has gradually made the Taliban (a parochial Pashtun insurgent movement), rather than al Qaeda, America’s primary enemy in Afghanistan. A more modest and realistic strategy means even abandoning the goal of a definitive victory over al Qaeda itself.

Instead, we need to treat the terrorist threat that al Qaeda poses as a chronic, but manageable, security problem. Foreign policy, like domestic politics, is the art of the possible. Containing and weakening al Qaeda may be possible, but sustaining a large-scale, long-term occupation of Afghanistan and creating a modern, democratic country is not.

Rose Friedman, co-author of several books with her late husband and Nobel laureate economist Milton, passed away this morning. Rose and Milton co-wrote Free to Choose the wonderful book that formed the basis of Milton’s PBS television series, as well co-writing their joint auto-biography “Two Lucky People.”

She was intimately involved in the school choice movement both before and after Milton’s passing, as co-founder of the Milton and Rose D. Friedman Foundation for School Choice, ably led by Robert Enlow.

Rose and Milton were not just skilled economists who cared about kids, they were a charming couple. At a casual policy event a decade ago, they shared a single armchair to ensure that there would be enough seats for everyone. They weren’t just models of commitment to a worthy cause, they were models for how two smart, forthright people can build a marriage that lasts a lifetime.